Construction has picked up in the north end in the past two years as the economy has rebounded. The Strawberry Fields subdivision in Macomb Township is one place where piles of lumber and for sale signs represent a bright future for the township's tax interests.
DAVID ANGELL--FOR THE MACOMB DAILY

It is a tale of two cities.

One is an aging municipality still dealing with home foreclosures, abandoned businesses and a tax base that has sunk to such depths that its recovery from the 2008-10 Great Recession may take three decades. To avoid more budget cuts, it is seeking a whopping 14-mill property tax hike.

The other is a former farm community, a suburb that has revived the building boom it enjoyed pre-recession, with 15 new subdivisions under construction and tax dollars flowing into its coffers at such a rate that its 2013-14 budget surplus -- on top of a substantial “rainy day” fund from the past -- was $2.9 million. At the same time, taxes remain low and future financial difficulties are unimaginable.

One is the city of Eastpointe in south Macomb County; the other is Macomb (actually a township, not a city) in north Macomb County.

They are separated by just 10 miles. But they might as well be worlds apart.

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The divergent paths followed by these two communities are representative of a disturbing pattern across the state, according to a new University of Michigan study.

U-M’s Gerald R. Ford School of Public Policy found that, for the first time in six years, more Michigan localities are more able to meet their financial needs in 2014 than those who are less able to do so.

But the university’s survey of more than 1,300 local officials statewide has found a “tipping point” reached this year, in which many cities and townships are on the road to recovery, and many may be on the road to ruin.

Dramatic declines in property values, cuts in state and federal aid and lingering foreclosures and tax delinquencies have caused havoc for cities like Eastpointe. While revenues fall, expenses for public safety and infrastructure – streets, sewers, water lines – present a daunting task for upcoming years in the urban communities and “inner ring” suburbs.

The U-M study found that 35 percent of local officials expect their community to be better off a year from now while 22 percent expect to be even worse off in 2015. Those towns doing best see good times ahead; those still suffering from dark days see a further slide toward the fiscal cliff.

“… This really points to two different groups of local governments that are moving in two different directions,” said Thomas Ivacko, program manager for the Ford School’s Center for Local, State and Urban Policy.

Eastpointe City Manager Steve Duchane said that, while Macomb Township enjoys the construction of 15 subdivisions that will be home to 1,800 expensive, upscale houses, his “built-out” city has no room for even one new subdivision.

“It’s a juxtaposition – a stark contrast,” Duchane said. “It depends on where you are located. ‘Out of the woods’ means a whole different thing in Eastpointe.”

The city, which borders Detroit, endures a cycle of residential and commercial property changes that consist of build-abandon-build. As a result, Michigan land-use and property tax laws work against any plans for recovery.

Officials estimate that, because of the 1994 Proposal A cap on annual property assessment increases – currently a 1.67 percent limit – it will take Eastpointe 22 more years to regain its tax base of 2008 when the housing crisis was in full swing.

While trying to avoid hints of bitterness, Duchane said a community such as Macomb Township effortlessly enjoys a strong flow of revenues from property taxes and fees charged to developers.

“Private industry and growth run those communities. You have no place to go but up,” he said.

“If I took a snap shot, that’s what people might see” – a community that’s growing at the expense of other municipalities,” Koehs said. “But it’s really part of a cycle. Eastpointe had its time. The newer neighborhoods are bound to increase in value.”

The 36-square-mile township, once the fastest-growing community in Michigan, remains just two-thirds developed. This is their heyday.

When Eastpointe was growing rapidly in the early 1960s, Macomb Township’s population was about 5,000. Now, the community situated between M-59 on the south and 26 Mile Road to the north is expecting to reach 150,000 residents within a couple of decades.

The flourishing townships of suburban Detroit, Koehs said, also benefit from a new approach toward government services and expenses.

The approximately 84,000 people living in Macomb Township still rely upon a part-time fire department that goes back to the days when farm workers would rush from their fields to the nearest fire station when a blaze broke out and a warning siren blasted.

The township has no police department – they contract with the county Sheriff’s Department for 22 officers of various ranks who all patrol the streets.

That means no desk jobs. No special investigative units. The Sheriff’s Department provides all of that.

And no legacy costs for police and firefighters’ pensions and health care benefits.

“Those things were set in motion many years ago when benefits were initially cheap,” Koehs said. “Some communities can’t grow when they’re spending a lot of money to bail the boat out.”

The savings on legacy costs has left money for other luxuries. Macomb has a state-of-the art township hall and a recreation center that puts most private gyms to shame.

Across Macomb County, the U-M study found that an economic divide has led to the sharp contrast between localities that have put the recession behind them and those that are hoping to fend off the arrival of a state-appointed emergency manager.

The survey revealed that more than one-third of officials anticipate a further decline in property tax revenues over the next 12 months. Still, about half anticipate increased public safety needs and 80 percent foresee greater infrastructure expenses.

More than one-fourth suspect that they will need to take a bigger bite out of their rainy day fund in the following year while a slightly larger proportion of officials foresee a buildup of their fund.

As a result, those responding to the survey mostly predict that the days of layoffs and pay cuts for municipal workers are over. But pushing more expenses onto employees for health care benefits and pensions is very much in play.

Some see cuts in services coming, or privatizing certain departments, or engaging in consolidation agreements with neighboring communities.

Eastpointe’s February ballot proposal is a bit of an odd duck in the public sector movement toward cost savings through shared services. The city has joined with Hazel Park, located several miles to the west in Oakland County, to present voters in both cities with a 14-mill tax proposal to fund police and fire services.

Duchane discovered an old state law allowing for collaborations between cities presents the opportunity to create a bi-community municipal corporation. That obscure provision opens the door to cities so they can levy more than the standard 20-mill limit in overall property taxes.

Duchane, who was once on the other side of the ledger during his 17 years as Sterling Heights city manager when that community was growing rapidly, said the tax proposal is not the product of a loophole in the law. It simply allows communities without hope of new growth to create a more level playing field with the townships.